Withholding tax: Issues for securities operations and custody

Abstract

Two major initiatives to simplify the currently complex, fragmented and manual world of international investment withholding tax are moving slowly to fruition. The European Commission’s Tax Barriers Business Advisory Group and the Organisation for Economic Co-operation and Development’s (OECD’s) Tax Relief & Compliance Enhancement (TRACE) group have both endorsed a withholding tax and reporting model that envisages financial institutions contracting directly with member states to take on documentation, withholding and reporting responsibilities. These initiatives have, at their foundation, the principles of standardising and automating many of the currently manual processes faced by securities operations staff. In a global tax environment fixated on FATCA and tax evasion, the author explains the context and direction which the securities industry may take on these equally important issues.